Results 1 to 4 of 4

Math Help - Maths assignment - compound interest or geometric progression

  1. #1
    Newbie
    Joined
    May 2008
    Posts
    7

    Maths assignment - compound interest or geometric progression

    Question 4
    Capital invested with interest, may be compounded at any time interval, (quarterly, daily or continuously) for any set time period. The formula used for discrete intervals of time is given by: FV = PV (1+r)^n
    (FV is future value, PV is present value, r is interest rate for the time interval, n is number of time intervals)
    a) Find the return on $100 investment compounded daily at 6%p.a. for 10 years

    a) FV =?
    PV = $100
    r= 0.06/365.25 = 0.0001642710472
    n= 3652.5

    PV (1+r)^n
    = $100 (1+0.0001642710472)^3652.5
    = $182.20
    Is that right? Or am i meant to do it like a geometric progression? If so, what is the geometric progression formula? I learnt it today but i left my workbook at school.
    Follow Math Help Forum on Facebook and Google+

  2. #2
    Junior Member
    Joined
    Jun 2008
    Posts
    38
    Thanks
    1
    Yep, what you've done is correct.

    I think the geometric progression you're talking about is just the long way around, eg recalculating with a different principal after each interest payment - which would mean 3653 calculations for daily compounding! I'd say you picked the right method
    Follow Math Help Forum on Facebook and Google+

  3. #3
    MHF Contributor
    Joined
    Aug 2007
    From
    USA
    Posts
    3,111
    Thanks
    2
    Who actually uses 365.25 in practice? If you REALLY want to account for Leap Year across millenia, you shoud use 365.2475.

    Unless you are specifically required to use 365.25, I would avoid it. Anyway, over a 10-year period, you will hit either two (avg. 365.20 days) or three (avg. 365.30 days) leap years. 365.25 is a little arbitrary.
    Follow Math Help Forum on Facebook and Google+

  4. #4
    Flow Master
    mr fantastic's Avatar
    Joined
    Dec 2007
    From
    Zeitgeist
    Posts
    16,948
    Thanks
    5
    Quote Originally Posted by bubbles73 View Post
    Question 4
    Capital invested with interest, may be compounded at any time interval, (quarterly, daily or continuously) for any set time period. The formula used for discrete intervals of time is given by: FV = PV (1+r)^n
    (FV is future value, PV is present value, r is interest rate for the time interval, n is number of time intervals)
    a) Find the return on $100 investment compounded daily at 6%p.a. for 10 years

    a) FV =?
    PV = $100
    r= 0.06/365.25 = 0.0001642710472
    n= 3652.5

    PV (1+r)^n
    = $100 (1+0.0001642710472)^3652.5
    = $182.20
    Is that right? Or am i meant to do it like a geometric progression? If so, what is the geometric progression formula? I learnt it today but i left my workbook at school.
    This question does not belong in the probability and statistics forum.
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Compound interest at changing interest rates
    Posted in the Business Math Forum
    Replies: 2
    Last Post: October 21st 2010, 04:55 AM
  2. Maths Assignment ...Help me Please !!!!!
    Posted in the Discrete Math Forum
    Replies: 1
    Last Post: August 16th 2009, 05:01 AM
  3. Replies: 8
    Last Post: March 23rd 2009, 07:26 AM
  4. Replies: 0
    Last Post: September 5th 2007, 02:50 AM
  5. Maths assignment
    Posted in the Algebra Forum
    Replies: 2
    Last Post: October 20th 2006, 06:09 AM

Search Tags


/mathhelpforum @mathhelpforum